Q&A: Can Public-Private Partnerships Like I-69 Section 5 Work?

Posted June 23, 2017

One week after the state announced it plans to take over construction of I-69 from Bloomington to Martinsville, there are still questions about what it means for taxpayers and the final stretch of the interstate from Martinsville to Indianapolis.

A: I was not surprised. Mainly because about a year it ago it became evident that the developer was having a hard time paying its bills and that it was beyond on payments to several subcontractors. This, I believe, was last summer, it was almost exactly a year ago. And the project seemed to be in trouble. At this point it’s a few years behind schedule, so there were plenty of warning signs.

Q: Were there any red flags that stood out to you from the beginning?

A: I don’t know enough to say that. I can say that, as I’ve been watching this having written a book about Interstate 69 and being interested in how the various pieces of it are built and how they come together, I’ve been watching sort of the developments slowly take place. This was one of the few places where they were trying to build it through a public-private partnership. So, that in and of itself is not a red flag.

But, I guess I would say that it had a chance of not going well because it was, in the United States, a fairly exotic arrangement. Which is to allow a private company to do everything, to oversee construction, plan it, design it, finance it and everything. So, I think one lesson that we’re learning here is that public-private partnerships can be risky.

Q: That state says taking the project over will actually save $30 million. How is that possible?

A: I’m not really able to defend or disagree with the numbers that we’re hearing come out of the Indiana Finance Authority. I haven’t seen the buyout arrangements. I guess the point other critiques have made is that if we’re still saving $30 million we could have saved a lot more. And, if it was so much cheaper for the state to run it, maybe the state should have run it from the very beginning. I don’t know when everything is said and done it’ll be very difficult to prove that we’ve saved a bunch of money or it would have cost a lot of money. It’s very hard to prove a negative, in other words. If from day one the state had run this project and it had been completed on time, would there be greater cost savings than $30 million? Probably.

“If you think we need stronger vetting for international people coming into the country, maybe we need better vetting for international money coming into the country.”

—Matt Dellinger, Journalist & Author

Q: What advantages are there to pursuing public-private partnerships for these types of projects?

A: I think in general the theoretical advantages to public-private partnerships are many. If you look at sort of the “old” way of doing things, the government might have one firm plan where the road goes and then another firm will design the actual road in that right-of-way and then another firm will construct it. And, at each step of the way, you could be creating inefficiencies. In other words, the firm that plans the road might not plan the thing that makes the most sense for construction. They may end up creating an expensive construction project because they’re not the ones responsible for it.

So, by making one private entity with a profit motive and budget and timeline motive and putting them in charge, in theory would have a payoff because the government, especially if you’re a Republican, seems to you an inefficient project manager because if they need more money they just throw more money at it and no one in government knows how to run infrastructure projects. I guess what we’re seeing is projects can fall to inefficiency and fall behind schedule whether it’s a private company running it or whether it’s the government running it. And, it’s probably a mistake to categorically say that the government is better at it or that the private sector is better at it.

Q: Do you think there lessons to be learned from the problems with Section 5?

A: I do. I think the term vetting comes to mind. I don’t know what vetting was done. I’m not an expert enough in P3s. and that’s the point, no one is. These are new arrangements for us here in the U.S.

If you think we need stronger vetting for international people coming into the country, maybe we need better vetting for international money coming into the country. Maybe we need to know what interests are being represented and whether they’re good partners or not.

Q: What does this all mean for the funding of Section 6, which hasn’t yet been secured? The state isn’t ruling public-private partnerships out.

Yeah, it’s a good question. And, to add to the uncertainty, there’s another question which is what’s going to happen at the federal level. I mean we’re hearing a lot about Trump’s infrastructure plans, he wants an investment in infrastructure.

Governor Pence, who was the person who entered into this agreement that we’re talking about today for Section 5, is now the vice president and potentially active in coming up with infrastructure policy at the federal level. It has long been the hope of the I-69 proponents up and down the corridor that someone in the federal government will sort of take a look at this and say, this a project of national importance and you know it’s worth billions of federal money to get it built and just hand over the money. That hasn’t happened, which is why Indiana turned to these more exotic P3 partnerships to kind of get the job done.

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